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2020 (3) TMI 567 - HC - Income TaxShort deduction of Security Transaction Tax (STT) - Whether Tribunal was correct in holding that NSE had not committed any fault in collection of correct STT, when infact section 100(1) of Securities Transaction Tax mandates the recognized stock exchange for collection and recovery of STT at the rates specified in section 98 of STT Act? - responsibility of member brokers of NSE to collect the correct STT on the transactions - penalty for failure to collect the said Security Transaction Tax - HELD THAT:- STT is collected through a member broker under a particular client code. The client code is provided by the brokers and not by the stock exchange. Responsibility of the stock exchange is to ensure firstly that STT is collected as per Section 98; secondly, it has been determined in accordance with Section 99 read with Rule 3 and Explanation thereto; and lastly, such STT collected from the purchaser or seller is credited to the Central Government as provided under Section 100. Holding that respondent had not committed any default and that under the statute respondent was not liable for any alleged short deduction of STT, Tribunal deleted the addition made on this count as modified by the first appellate authority. Consequently, levy of interest and penalty were deleted. As advert to the explanation provided by one of nine brokers before the Assessing Officer. Morgan Stanley India Company Private Limited which was one of the broking companies dealing with FIIs stated before the Assessing Officer that for institutional clients the stock exchange provided facility of different client codes for purchase and sale trade for the same client to ensure that such trades were not netted. On occasions where client codes for institutional trades were not modified by the broker, the trades were treated as squared off trades and a lower STT was levied. This resulted in the exchange charging a lower STT from the member broker while the member broker collected a higher delivery based STT from the client. We find no error or infirmity in the view taken by the Tribunal that under the statute respondent was not liable for any alleged short deduction of STT and therefore, no fault can be prescribed to the respondent and to hold the respondent to be in default for short collection of STT.
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